Balcony struck down by High Court

A dispute over a 5 square metre balcony is probably the most expensive balcony feud ever in Australia. The High Court recently ruled in a dispute between the owner of a property and the body corporate itself. The owner of the property wanted approval from the body corporate to allow the owner to build an additional balcony between his two existing balconies in a Noosa Heads complex. This change would have effectively granted the property owner additional property, albeit common air space, for the property.

The rules and the body corporate legislation require that any change to a property that takes away body corporate property requires unanimous consent of all of the members of the body corporate before it can happen. In 2012 the body corporate members unanimously agreed to deny the balcony upgrade, sparking the property owner to try and overturned that decision through the courts. The property owner went through the appeals process before ending up in the High Court.

In the High Court, the property owner argued that it was unreasonable of the body corporate to not allow the extension of the balcony. However, the High Court ruled that it was not unreasonable that the motion to deny the balcony upgrade was unreasonable.

The fight, which reportedly cost the parties somewhere in the order of $500,000.00, now means that body corporates will know that such changes can be blocked and gives certainty to the way that the courts in Queensland will interrupt these disputes. It is also a good lesson for people considering entering litigation; now the property owner has been left to foot a hefty legal bill all over his attempt to create a bigger boundary on his property.

At Streten Masons Lawyers we can assist your clients in all types of legal disputes – particularly body corporate disputes. Heading into expensive litigation processes can be incredibly costly for your business so getting advice is the best thing to do. Contact one of our lawyers today on (07) 3667 8966 or info@smslaw.com.au to find out how we can assist your clients.

Into the Deep End

Why You Need to Know the Difference between Shared & Non Shared Pools

Do you own a pool? Are you thinking of buying somewhere with a pool? You’re probably aware that there are heaps of pool safety laws under the Building Act 1975 (QLD) that apply to pool owners, but did you know that different regulations can apply for Shared Pools and Non-Shared Pools?

Here’s what you should understand before diving into a sale or purchase of properties with pools…

Non-Shared Pools

These are pools that are only be used by the residents of one dwelling, such as a private house pool or a spa on a private balcony. Note: if the pool is associated with a “Class 3 Building” (such as a hotel, motel or backpacker hostel) it will be considered a Shared Pool – even if it’s only accessible to some residents.

When entering into a Contract of Sale, the Seller must either:

provide the purchaser with a pool safety certificate; or

give a Form 36 notice that they do not have a certificate.

If the purchaser doesn’t have a valid pool safety certificate at settlement then they must obtain one within 90 days. Certificates are valid for 2 years for Non-Shared Pools, no matter how many times the property is sold or leased during that period. You don’t need to renew them once they expire, unless you decide to lease or sell the property.

Shared Pools

These are pools that can be used by residents of more than one dwelling, such as hotels, backpacker hostels or body corporate pools.

When entering into a contract of sale, the Seller must either

provide the purchaser with a pool safety certificate; or

give a Form 36 notice that they do not have a certificate.

If the Seller doesn’t provide a certificate then the Form 36 notice must also be given to the Queensland Building and Construction Commission and the body corporate (if there is one) prior to settlement.

The Buyer will have 90 days from settlement to comply with the pool safety standards. Certificates are only valid for 1 year for Shared Pools and must be displayed at the pools access point.

Leasing Properties with Pools

When leasing a property with a Non-Shared Pool, the property owner must ensure a valid certificate is in effect before the lease agreement is signed, however the tenant does not need to be provided with a copy.

Property owners who are leasing a property with a shared pool must either ensure that a valid certificate is in effect, or give a Form 36 notice to the tenant, the QBCC and the owner of the pool (i.e. the body corporate) before entering or renewing the lease. If there is a certificate, the tenant must be given a copy as well.

Property Agents

Finally, property agents should note that if you collect commissions in connection with a lease (or other accommodation agreement) for a non-shared pool, and no pool safety certificate has been obtained, you may be liable under the Property Occupations Act 2014.

How We Can Help

If you are buying, selling or leasing a property with a pool, remember that the pool safety requirements may vary depending on whether it is a Shared or Non-Shared Pool.

Contact us by emailing info@smslaw.com.au or phoning (07) 0667 8966 to check your obligations. Want to know more about the current pool penalties in Queensland? We recently wrote a full article on pools and the penalties which you can view here.

Building up to Bankruptcy

How Insolvency Could Stop Your Construction Firm

If you are a licensed builder in a company that is winding up due to bankruptcy, there are a number consequences set out by the Queensland Building Services Authority (QBSA) which you should be aware of.

When a company can no longer satisfy its debt obligations and must be declared bankrupt, it is insolvent. An insolvent company may go through a winding up period, that is, the orderly wrapping up of affairs and closing down of a business, also known as an event.

When an ‘event’ occurs in a company where you hold the role of director, secretary, or influential person, you may be deemed an “excluded person” pursuant to section 56AC of the Queensland Building Services AuthorityAct 1991 (Act).

What are the consequences of this occurring?

When one event occurs, you will become an “excluded person” for a period of five years unless you can make appropriate submissions to the QBSA to have you deemed to be a “permitted individual”. This application must be made to the QBSA within 28 days after you receive notice from the QBSA that they intend to deem you an excluded individual.

Where a second or subsequent event occurs you will receive a second or subsequent notice from the QBSA, who has the power to deem you an excluded individual for life. When an individual is excluded for life, this means they can never be a licensee, director, or secretary of a licensee company. Again, the individual only have 28 days to apply to the QBSA to be categorised as a permitted individual.

What should I do first?

Where you receive such an exclusion notice you should immediately contact your professional advisors so that steps can be taken to determine whether you should make an application. Your advisor will properly prepare the application on your behalf; there are a variety of factors which must be considered to comply with the requirements of the legislation and give you the best chance of succeeding in your application.

The QBSA has considered my application and it has been refused, what do I do next?

Where the QBSA decides that it will not categorise a person as a permitted individual, you are at liberty to apply for a review of that decision through the Queensland Civil and Administrative Tribunal (QCAT).

The QCAT member will then conduct a new review of the matter to decide if the QBSA decision should have been to categorise the person as a permitted individual. These are important and complicated applications and once again you should instruct competent lawyers to act on your behalf in the application.

Where can I find help?

At Streten Masons Lawyers we can help if you are currently owed money by a person who you fear may become a bankrupt. We can also assist if you are owed money by a debtor and want to initiate bankruptcy proceeds against them. Contact Jeremy at Jeremy@smslaw.com.au or call on 07 5428 1111 to talk about how we can help your business.

Pools and Penalties

The changes in 2016

The Queensland Government introduced a number of Pool Safety requirements in 2010. While it was commonly known within the Real Estate Industry that the ‘grace period’ for the provisions introduced expired in late 2015, the practical implications for Sellers who have not complied with these requirements is less clear.

Under the Act a grace period of 5 years was given for pool owners to comply with the requirements; this expired on 30 November 2015.

As it stands, pool owners who do not have a compliant pools face up to 165 Penalty Units, which currently equates to $20,113.50. There are also additional penalties which may apply which relate to a failure to register a pool with the QBCC and complaints. This applies whether the owner is listing the property for sale or not and as such poses significant financial risks for pool owners.

Notwithstanding the above changes, the most recent twelfth edition of the REIQ Contract for House and Residential Land (Contract) was published in July 2016 and unfortunately has not been amended to specifically take into account the legislative changes.

Under Clause 4.2 of the Contract where no pool safety certificate has been issued the contract becomes conditional upon the Seller obtaining the Pool Safety Certificate and gives the Buyer the opportunity to terminate the contract if this is not provided.

It is likely that this right is going to be increasingly utilised as, despite the warning currently noted on the Contract,Buyers no longer have the benefit of the 90 day post-settlement grace period in which to obtain a Pool Safety Certificate.

While it would be of great use if the next edition of the REIQ Standard contract addresses these issues more clearly, our recommendation is that each property owner with a pool obtain the necessary compliance certificates prior to entering into a contract for sale.

For more information on pool safety regulations, or any other matters concerning property, contact us at info@smslaw.com.au or call 07 3667 8966. We’d be happy to help with your inquiry.

Top 7 Considerations for Buying Property off The Plan

When a new property is being built, whether it is units or new houses, often a developer will seek to sell properties prior to completion. Essentially you are entering into a contract before:

Construction of the building is complete; or

The registered title to the lot has not been created.

Developers sell properties off the plan for a number of causes but the two main reasons are:

To show their bank or financier that they have the requisite buyers of the completed properties to give comfort to the bank or financier that the end development will be sold; or

To give the developer the confidence to know that buyers will purchase the end products.

Often entire developments are sold off before they are completed.

However given the many variations and the uncertainties of the construction process, laws in Queensland obligate the developer to provide detailed disclosure as to what they are building and providing to the buyer. This also protects buyers who may not be aware of the different variables to ensure that the most important factors are disclosed.

What to look out for?

As with the purchase of any property where you buy a property off the plan you need to have a clear understanding of what you are buying. The contract will set out the terms of what you are buying and there are a number of factors to look at including:

1. The Plans

Whether you are buying a block of land, a unit within a small or a unit within a large complex it is very important that you know exactly what you are purchasing. The contract must attach plans which set out what is being constructed so that you can get an understanding. These plans are allowed to change by no more than 5% from the final constructed building otherwise you may have the option to get out of the purchase. In particular when you are buying a block of land to construct a house on you need to consider if there are any easements or other restrictions on what you can build (including building covenants). Make sure that you check these out in detail and if you are unsure that you ask the developer for more information.

2. The Surrounding Area

We always strongly recommend that you visit the construction site to see the surrounding areas, potential views, local amenities and other facilities. These are important as they will help you understand the location of where you are buying.

3. Approvals of The Plan

Depending on the type of construction and the contract, you may enter into an agreement before all of the required approvals are in place. When we use the term approvals we are talking about the local council and certification approvals that any new construction needs to have in place before it can be occupied. It is important that you consider this because if an approval is not in place then there may be an unreasonable delay to the construction which is outside the developer’s control.

4. Construction Timeline

Generally when you inquire with an agent or developer in relation to buying a property off the plan, they will generally give you an idea of when the development is likely to be completed. Pursuant to the law in Queensland each contract must have a sunset date, this is the date by which the construction is completed otherwise either the buyer or the seller can terminate the contract. However before you sign the contract to purchase you should see that the sunset date is not an unreasonably long time (it can be no longer than 5 and a half years).

5. The Property Value

You should always engage the services of a valuer to advise you if the purchase price you are paying for a property is market value.

6. The Deposit

When entering into an off the plan contract in Queensland a developer can take a deposit of up to 20% of the purchase price. This money must be held in a trust account. However you need to consider the actual sum of money and the length of the construction as you will not have access to those funds from when you sign the contract until when the purchase settles (after registration of the separate title with the titles office).

7. The Purchasing Entity

When entering into the contract to purchase the land it is important that you have the correct entity as the buyer of the contract. It is impossible to change it later without the consent of the developer which may or may not be given (sometimes if the value of the property has increased a developer will agree to change the purchasing entity for a higher price). This is an important consideration to take.

These are the most important considerations that you are buying a property off the plan. You should always seek advice on these issues and ensure that you are satisfied with what you are buying. Streten Masons Lawyers always recommends that if you feel something is not right with the contract you immediately consult a professional.

Finance

When buying a property off the plan often a contract will be subject to finance for a period of time after the contract is signed. You should be aware that when you are buying a property off the plan that any financier will make any finance approvals subject to a final valuation. In other words the bank will not guarantee you that they will fund the purchase as they want to ensure that what is being purchased is worth what you are paying for it.

It is uncommon for the finance condition to continue post construction as the developer will not want to take the chance on the banks valuer reducing the value. Therefore if you decide to buy a property off the plan you should satisfied and confident that you will be able to finance the purchase and be aware of the risks that you are taking.

Buying a property off the plan is an exciting venture but as with any investment you need to make sure that you do all of the due diligence correctly. At Streten Masons Lawyers we have extensive experience in reviewing and advising buyers of off the plan properties (as well as acting for developers on the other side) of their rights and obligations. If you would like further assistance please contact Jeremy Streten on 07 3667 8966 or Jeremy@smslaw.com.au.

ATO Introduces New Rules for Prestige Property Owners

Changes that have long been talked about are coming into force on 1 July 2016 that are designed to prevent foreign investors from avoiding their obligations to pay capital gains tax to the Australian Taxation Office (ATO). If you sell a property for more than $2million, then from 1 July 2016 you need to comply with the new Australian Government requirements to ensure that 10% of the market value of the property is not withheld.

Put simply the requirements are as follows:

Where a contract is signed on or after Friday 1 July 2016; and

The purchase price (or market value) of the property is more than $ 2 Million,

Then if the Seller is a:

Foreign resident then the Buyer must retain 10% and pay it to the ATO; or

Australian resident then the seller must, before settlement obtain a clearance certificate from the ATO and provide it to the Buyer to show that they Buyer does not have to retain 10% of the purchase price.

While there is no positive obligation on real estate agents to take any steps it is important that you are aware of these requirements to assist clients (whether buyers or sellers) to make sure that they comply with the requirements. These changes will come as a surprise to a number of people in the industry who are not aware that they are activeand there will be penalties for Buyers who do not comply.

The procedure to obtain a clearance certificate will be fairly straight forward. The ATO has introduced a form that is currently available in PDF but will soon be replaced with an online form. This form is used to prove to the ATO that the Seller of the property is an Australian resident. The Seller is then granted a clearance certificate so long as the ATO is satisfied that they are an Australian resident.

Before placing a property on the market a Seller can apply for a clearance certificate that will remain active for up to 12 months. In our view it is good practice for Sellers to start applying for these certificates when they place properties on the market. The reason for this is that as with obtaining any document from a government department the timing of the provision of these certificates could impact settlement times for Buyers and Sellers of properties. Therefore the sooner a seller obtains the certificate the sooner that a property will be able to settle. For example if you have a buyer who wants to settle within 14 to 21 days then you will need to ensure that the seller already has a clearance certificate to be able to settle.

The ATO has announced that the online forms will be available from 27 June 2016 (next Monday) so if you have any potential sellers concerned about the implications of these requirements then they can start applying online from that date (anyone who may be concerned now can also lodge a pdf form).

At Streten Masons Lawyers our goal is to keep agents up to date with changes to the law that may affect their business. We see this as an important change to be aware of to ensure that there are no delays with settlement or that sellers are not caught out unaware of these provisions. If you or any of your clients have questions about these changes please contact Jeremy Streten on 07 3667 8966 or Jeremy@smslaw.com.au

The Value of Due Diligence

Buying property is usually the most important investment any person will make. Getting what you pay for and making sure that everything relating to that property is correct can save you thousands of dollars. Due diligence is the legal term that is given to the process in which a prospective buyer of a property investigates all aspects of the property to ensure that they are getting what they pay for.

A common misconception is that due diligence is a process that is undertaken by big property investors who are spending millions of dollars on their property. The truth is that every investigation that a property owner does in relation to the property that they are buying is a due diligence investigation.

Why is it important?

All too often we see buyers of property not get what they originally purchased. They buy a property and do not investigate all aspects of it, including whether all of the improvements on the property have the required local council approval or whether there are no encroachments. Due Diligence will allow a prospective buyer of a property to be to ensure that they:

Are getting what they are paying for;

Know all aspects of the property;

Do not have any surprise costs or problems that can be reasonably discovered from the due diligence investigations.

When are due diligence enquiries conducted?

More often than not the due diligence process will begin before a buyer signs a contract with it; the process begins with the physical inspection of the property. The majority of the searches and inspections occur after the contract is signed and can include:

Building and pest inspections – to ensure that the building does not have any obvious structural problems or pest problems;

Finance applications – to ensure that the buyer can obtain finance to purchase the property;

Independent valuations – to ensure that the buyer is satisfied that they are not paying too much for the property;

Searches of council records including ensuring that all of the improvements on the property that require council approval however the required final approval in place;

Survey of the property to ensure that there are no encroachments;

Where the property is part of a body corporate, review of the body corporate records to make sure that there are no known problems with the property that are recorded in the body corporate minutes; and

Other government searches including of the contaminated land register, to ensure that the property is not contaminated, the Department of Main Roads to ensure that the department has no interest in the property and other searches.

There are many different investigations that a buyer can undertake of a property and this is just a short list of the main investigations performed by normal buyers of property.

What needs to occur for a buyer to be able to do their due diligence investigations?

The standard REIQ contract and other contracts used in Queensland do not usually give a buyer much ability to undertake due diligence enquiries other than building and pest and finance standard conditions. If a buyer is concerned and wants to undertake further investigations then they need to insert special conditions that can cover these aspects of the purchase and allow the buyer to undertake these additional investigations.

A buyer should always be satisfied with a property to ensure that they are getting what they are paying for. Streten Masons can assist with the review and drafting of clauses that will allow buyers to undertake these investigations. If you require any assistance in this regard please contact Jeremy Streten on 07 3667 8966.

The Benefits of Attention to Detail

We are seeing an increasing number of contracts come through where minor errors have been made during the drafting process. These minor errors can cause major problems during the conveyancing process.

In the mad rush of your day it can often be difficult to lay the ground work for ensuring that your hard won sales result in problem- free contracts.

We have identified a few common issues which arise in contract and have set up a quick checklist to be completed before drafting commences to ensure the main issues are correct

Description of Names

Often we see the names of buyer spelt incorrectly; this can be due to alternate spellings of common names, missing middle names or even not noting the Buyers full and correct legal name on the contract.

A simple way of ensuring that the name noted on the contract is correct is to insist of getting a photocopy of the Buyers Drivers Licence; this not only provides you with additional certainty regarding the Buyer’s identity but also gives an excellent reference for spelling.

Similarly, where individuals buy property through a company or Trust it is critical that the full details of the entity are obtained. This includes getting the ACN of the company and ensuring that the individual signing on behalf of the company is entitled to do so. It is also important to determine if a purchase is being made as Trustee; if so you must enter the name of the Trust on the Contract; failure to do so may result in significant Transfer Duty implications.

Encumbrances

It is critical that a title search is conducted over EVERY property which you draft a contract to sell.

While the title search gives a range of useful legal description of the property for contract purposes, title searches also provide a list of the registered encumbrances over the property.

As you would know, when drafting a contract the Seller must disclose any encumbrances effecting the property.

This can include encumbrance which will not pass with the property such as Mortgage and Caveats, as well as encumbrances which may be transferred to any Buyer including Leases and Easements.

The REIQ Contract warns sellers that they must disclose all Title Encumbrances which will remain after settlement. It also warns drafters that stating ‘refer to title’ or ‘search will reveal’ is not sufficient. Where this occurs issues may arise which may negatively impact on your clients and may give rise to a right to terminate or a right to seek compensation.

By ensuring that a title search is completed and that these particulars are transcribed in the contract this potential problem can be resolved. If you are unsure if the encumbrance should be noted we recommend a cautious approach it is better to over-disclose than under-disclose.

Finance and Building and Pest Inspection

Finance and Inspection clauses are commonly not fully completed. Unfortunately, the result of this is that the clause can be rendered completely void therefore the Buyer misses out on a right to negotiate terms or get out of contracts which they are no longer happy to proceed with.

Further, while standard Finance approval provisions do not require the Buyer to provide documentation regarding the terms of their finance approval, a Buyer can be obliged to provide a copy of any building and pest report to demonstrate the problems within the Property.

If a Buyer is concerned regarding a property, but wishes to sign the contract so as not to miss out, often times a building and pest clause is not sufficient; it is often prudent to include a Due Diligence provision as a Special Condition to provide a broader right for the Buyer.

We recommend that all drafting staff mark off the following checklist prior to drafting contracts to ensure that the ground work has been laid for a contract:

Title Search;

Company Search (if necessary)

Identification

Special Conditions Yes/ No

If you have any questions please feel free to contact us on 07 3667 8966.

Joint Tenants vs Tenants in Common

By Jeremy Streten

Where you have more than one owner of a property they can either as joint tenants or tenants in common. The difference is a technical legal difference that can have ramifications on the owners of property. We often have agents contact us asking which one should apply in different circumstances; the truth is that the difference is a technical legal difference and should be left to buyers solicitor to determine.

It is important to note that as an agent, you do not need to worry about whether the buyer is buying the property as joint tenants or in tenants in common when drafting the contract. That does not form part of the contract and is something that the solicitor acting for the buyer can insert later.

If you are not aware of the difference the basic difference is that:

If you are tenants in common you own a certain percentage of the property, whether that be 50% or 99% and the other owner or owners own the other parts of the property;

If you are tenants in common if you die your share of the property is left as a portion of your estate;

If you are joint tenants with another owner or owners then you own all of the property with that other person or persons. There is no percentage ownership of the property;

If you are joint tenants then if you die the other owner takes the balance of the land upon your death; and

If one of the owners is a company or a trust then it must be tenants in common and cannot e joint tenants.

Joint tenants are usually used for a husband and wife buying a property whereas tenants in common are used where you have multiple investors, investing in a single property and who want to maintain a percentage ownership in the property.

As I said above, the actual ownership is usually something that is sorted out by the lawyer acting for the buyer and any questions should be directed to the buyers lawyer, however this article is designed to give you as an agent information so that you can at least discuss the different options with a buyer if you are ever asked.

If you have any questions in relation to this distinction, please contact me on 07 3667 8966 or Jeremy@smslaw.com.au.

Pitfalls when Purchasing a PropertyBuilding Approvals and Finals

Buying property is usually one of the most important investments you will ever make. Making sure that you get what you pay for is very important. While it is usually a condition of a residential purchase contract that the contract is subject to the Buyer obtaining satisfactory building and pest reports, the scope of this clause is often overestimated by Buyers.

Under the current Standard REIQ Contract for House and Residential Land (Fourth Ed) clause 4.1 states that a contract is conditional upon a Buyer obtaining a building report on terms satisfactory to the Buyer.

This provision is often misinterpreted by Buyers into thinking that any improvement on the property, such as a house, garage, shed or patio must have full approvals from their Local Council.

Clause 7.6 of the Standard Contract sets out the Sellers responsibilities in relation to requirements of authorities. The Seller is only responsible if a valid notice or order has been made prior to the Contract Date. This means that unless a Council has issued a notice or order regarding an unapproved or illegal structure, under the terms of the Contract, the Seller is not required to obtain any approvals or final certificates prior to Settlement.

Practically, this means that if finals have not been granted a Buyer is not able to terminate the contract or negotiate for a reduction in the purchase price.

This can become an issue in the future if you sell the home and the new contract includes a requirement to obtain building approvals and finals.

The information regarding these final certificates is found in local government searches (excluding rates) which range from $200.00 to $300.00 in Queensland. Given that most Buyers do not instruct solicitors to conduct these searches until the Contract has become unconditional, unfortunately often Buyers are unaware of the multitude of potential finals that they will become liable for.

We have noticed that this is becoming increasingly common as home owners conduct more and more DIY renovations. Home Owners may take on weekend jobs of adding a patio or shed to their property, without going through the formal approval process and obtains all necessary finals from their Local Council which may impact on future sales.

While this issue has become increasingly common, there is an easy solution. By the inclusion of a special condition addressing this issue, Buyers can stipulate that any Seller must provide final building approval certificates by Settlement.

As part of our service for the Purchase of a Property we are happy to review the terms of the Contract before it is signed to ensure that any concerns you may have are addressed.

If you wish to purchase a property and are concerned regarding additions made to the property ask your Real Estate agent to provide the unsigned contract to us here at Streten Masons Lawyers.